Goldman Sachs Leads $25 Million Financing in Startup Motif

April 12 (Bloomberg) -- Motif Investing Inc., a Web-based
startup that lets investors buy baskets of stocks based on
themes like home improvement and Obamacare, raised $25 million
in a financing round led by Goldman Sachs Group Inc.

Darren Cohen, who leads Goldman’s principal strategic
investments group, is joining Motif’s board as an observer, the
San Mateo, California-based company said today in a statement.
Existing investors Foundation Capital, Ignition Partners and
Norwest Venture Partners contributed to the round.

Founded in 2010, Motif is among an increasing number of
startups offering online products for investors that are
designed to lower the cost of trading while avoiding high-priced, poor-performing mutual funds. Jemstep Inc. and
FutureAdvisor provide asset-allocation advice and help clients
easily make the recommended trades, while Wealthfront Inc.
manages money online by investing in low-fee index funds.

“This space is heating up,” Hardeep Walia, 40, Motif’s
chief executive officer, said in an interview. “If you think
about what we’ve done in Silicon Valley, we’ve disrupted so many
businesses, but no one’s traditionally had luck in financial
services.”

Motif offers custom-made and user-generated funds of up to
30 stocks for about $10. To date, the company has focused on
providing retail investors an alternative to exchange-traded
funds sold by companies like E*Trade Financial Corp. and Charles
Schwab Corp.

Investment Savings

With the additional financing, Motif is rolling out the
software to investment advisors, giving them products to offer
clients without management fees attached.

For example, brokers could sell a fund created by Motif,
use one created by someone else that’s available on the site or
establish their own by copying what’s in a particular mutual
fund.

“That allows them to save the 2 to 3 percent fees they’re
paying every year to mutual-fund companies,” Walia said. “They
can either take that as a reward for their business or pass the
savings along to customers.”

Motif has 40 employees, including several early executives
from E*Trade. The company has patent-pending technology that
lowers the cost of volume trading, letting it make “good
margins” at $10 a trade, Walia said.

Obamacare, Housing

The Obamacare motif includes shares of hospitals like HCA
Holdings Inc., electronic medical-records providers such as
Cerner Corp. and generic-drug maker Actavis Inc. The fund is
designed for investors looking to benefit from the Affordable
Care Act, which may extend coverage to 30 million previously
uninsured Americans.

There’s also a motif called Ivy League that follows the
investment strategy of David Swensen, chief investment officer
at Yale University. Other motifs focus on biotechnology
breakthroughs, the natural-gas glut and the housing recovery.

The Goldman Sachs group leading the investment is part of
the bank’s securities division and backs financial-technology
startups and market structure-related companies. Previous
investments include the London Metal Exchange and Broadway
Technology LLC, a provider of electronic-trading systems.

In today’s release, Cohen of Goldman Sachs said Motif “has
taken an innovative approach to traditional investing.”